2006 was a reasonable year but not even close to being in the same class as 2005. Prices were anticipated to drop significantly but in fact this did not occur. The secondary market for 2005 was continuing to spiral ever higher and the fascination with this new asset class drove players into the fray, with prices barely lower than 2005. It was all a bit crazy. The market had been hijacked by a mentality that had no regard for quality.
Emboldened by this new paradigm, the negociants snapped up the awful 2007 vintage. They figured they could sell dishwater to the new buyers and they were probably right. Prices traded down around 10% from 2006 despite the very obvious inferior quality of the wine. In the past, prices would have dropped fifty to eighty percent for such a vintage. Volumes however seemed suspiciously light. Trade talk was that some chateaux and negociants were deliberately hoarding stock to protect prices, using the phenomenal profits of the previous years to keep the 2007s off the street. Good luck to them. It won’t work. Secondary market prices for 2007 are falling precipitously, as they should. The demographic who bought will be horrified to know they have purchased seriously inferior product at prices that are embarrassingly high. They are guaranteed to lose money on the investment.
Of deep concern for the 2008 En Primeur vintage, which actually seems quite good, with patches of excellence, are the rumours of failing negociants. Remember that as a buyer you are extending unsecured credit for 2 years to your supplier. If they fail, you have nothing. Lots of new players are now in the market and many will be struggling as demand falls. If you must get involved, do a credit check on your supplier. If they baulk, don’t buy from them and wait for the stuff to appear in bottle. Chances are it will be cheaper anyway. - Robert Rees
Robert is a founder of Wine Exchange Asia, serving customers in Singapore and Hong Kong. For more information please visit wineexchangeasia.com or write to wine@hkgolfer.com
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